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One of the benefits of Risk Management is Improved decision-making.
Risk management provides decision-makers with important information about potential risks and their likelihood and impact, which can help them make more informed decisions.
In this article, we still focus on the oil and gas industry; we will discuss one type of insurance policy that is almost required in every oil and gas contract, which is Comprehensive General Liability (CGL) insurance.
As a senior insurance broker, I would like to elaborate on this type of insurance. Many of my clients say that they only want to buy this type of insurance to comply with the contract. They do not see the benefits of it.
I hope with this article; oil and gas contractors will understand the reasons for the requirement in almost every oil and gas industry contract.
If you are interested in this article, please share it with your friends so they can understand as you do. For you, the new readers, I would like to say the warmest welcome; if you need more information, we have hundreds of articles; please browse on the page’s top, right and left sides.
Understand The Comprehensive General Liability Insurance
Comprehensive General Liability (CGL) insurance is typically required in oil and gas construction and operation contracts to protect against the risks and liabilities associated with these industries.
These risks and liabilities can be significant due to the type of work involved, which often includes heavy equipment, hazardous materials, and dangerous transporting.
There are some reasons why CGL insurance is required in oil and gas construction contracts:
- Protection against bodily injury and property damage
Oil and gas operations often involve heavy equipment, drilling, and transportation of hazardous materials.
This creates a significant risk of bodily injury and property damage to workers, neighboring properties, and the environment. CGL insurance can provide coverage for these risks and liabilities.
- Compliance with legal and contractual requirements
Many contracts and regulations require companies to carry liability insurance. CGL insurance is often a requirement for companies to bid on and win oil and gas contracts.
- Protection against lawsuits
In the event of an accident, workers or third parties may sue the oil and gas company for damages. CGL insurance can provide coverage for legal defense costs, settlements, and judgments.
- Risk management
Oil and gas companies operate in a complex and high-risk environment. CGL insurance can help manage these risks and protect the company’s assets in the event of a claim.
CGL insurance is required in oil and gas construction and operation contracts to protect against the risks and liabilities associated with these industries. The insurance helps manage risks, comply with legal and contractual requirements, and provide financial protection in case of a claim.
What are the coverages of Comprehensive General Liability insurance?
Comprehensive General Liability (CGL) insurance covers various risks and liabilities businesses face, including those in the oil and gas industry. Here are some of the coverages typically provided by CGL insurance:
- Bodily injury and property damage liability
This coverage protects against claims arising from bodily injury or property damage caused by the company’s operations or products. For example, if a worker is injured while operating heavy equipment or an oil spill damages nearby property, this coverage would provide protection.
- Personal and advertising injury liability
This coverage protects against claims of libel, slander, copyright infringement, and other personal or advertising offenses. For example, this coverage would protect if a company’s advertising campaign is accused of copyright infringement.
- Products and completed operations liability.
This coverage protects against claims from products manufactured or sold by the company and completed operations such as construction projects. For example, if a pipeline constructed by the company fails and causes damage, this coverage would provide protection.
- Medical payments
This coverage provides for medical expenses for injuries sustained on the company’s premises or as a result of the company’s operations, regardless of fault.
- Defense costs
This coverage covers legal defense costs, including attorney fees, court costs, and settlements or judgments.
- Pollution liability
This coverage protects against claims arising from pollution, including oil spills or leaks. This coverage may be significant for oil and gas companies.
It’s important to note that the specific coverages and limits provided by CGL insurance may vary depending on the policy and the company’s particular risks and needs.
It’s essential to work with a knowledgeable insurance professional to ensure that the policy provides adequate coverage for the company’s risks and liabilities.
Examples of claims and accident cases of CGL insurance in oil and gas
For example, the company may be held liable if a worker is injured while operating heavy equipment or if a pipeline constructed by the company fails and causes damage to nearby property or the environment. It may claim its CGL insurance policy to cover legal defense costs, settlements, or judgments.
In the oil and gas industry, pollution liability can be a significant risk, and CGL insurance policies may provide specific coverage for pollution-related claims.
For example, if an oil spill or leak from a company’s operations causes environmental damage, the company may be liable. It may claim its CGL insurance policy to cover cleanup and remediation costs.
Companies in the oil and gas industry must work with experienced insurance professionals to ensure that their CGL insurance policy provides adequate coverage for their specific risks and liabilities.
CGL insurance claims cases happened in oil and gas
Here are a few examples of CGL insurance claims cases in the oil and gas industry:
- In 2010
An explosion on the Deepwater Horizon drilling rig in the Gulf of Mexico resulted in 11 deaths and a massive oil spill. BP, the company responsible for the rig, claimed against its CGL insurance policy to cover the costs of legal defense and settlements related to the accident.
- In 2013
A pipeline owned by ExxonMobil ruptured and spilled oil in an Arkansas neighborhood. The company claimed against its CGL insurance policy to cover the cleanup costs and compensation for affected residents.
- In 2014
A pipeline owned by Plains All American Pipeline ruptured and spilled oil along the California coast. The company claimed against its CGL insurance policy to cover the costs of cleanup and legal settlements related to the spill.
These are just a few examples of CGL insurance claims that can arise in the oil and gas industry. Companies in this industry must work with experienced insurance professionals to ensure that their CGL insurance policy provides adequate coverage for their specific risks and liabilities.
What is the meaning of the limit of liability in CGL insurance?
The limit of liability in Comprehensive General Liability (CGL) insurance refers to the maximum amount of coverage the insurer will pay for covered losses and damages arising from a single occurrence or aggregate of occurrences during the policy period.
In other words, the limit of liability is the maximum amount the insurer will pay the policyholder for a covered claim, regardless of the total damages or losses sustained.
For example, if a company’s CGL insurance policy has a limit of liability of $1 million and the company is found liable for damages of $1.5 million in a covered claim, the insurance company will pay only up to the limit of liability of $1 million. The company will be responsible for paying the remaining $500,000.
It’s important to note that the limit of liability can vary depending on the specific policy and the company’s needs and risks. Generally, companies with higher risks or exposures may require higher liability limits to ensure adequate coverage.
It’s also important for companies to carefully consider their potential risks and liabilities when choosing a limit of liability for their CGL insurance policy. An experienced insurance professional can help businesses assess their risks and choose an appropriate limit of liability to ensure adequate coverage in the event of a claim.
Why do the contractors of oil and gas operators need an insurance broker for their CGL insurance?
Contractors who work for oil and gas operators may require Comprehensive General Liability (CGL) insurance to protect themselves from liability for damages or injuries they may cause while working on a job site. An insurance broker can be beneficial in helping these contractors navigate the complexities of the insurance industry and find the best policy to meet their needs.
Here are some reasons why contractors in the oil and gas industry may benefit from working with an insurance broker for their CGL insurance:
- Knowledge and expertise
Insurance brokers have in-depth knowledge of the insurance industry and can help contractors understand the complexities of insurance policies, coverage options, and exclusions. They can provide valuable guidance and expertise to help contractors find the best policy to meet their needs.
- Access to multiple insurance carriers
Insurance brokers work with multiple insurance carriers and can help contractors compare policies from different providers to find the best coverage and pricing options.
- Risk assessment
Insurance brokers can help contractors assess their risks and identify potential gaps in their insurance coverage. They can advise on risk management strategies to help contractors minimize risks and reduce insurance premiums.
- Claims support.
In the event of a claim, insurance brokers can provide valuable support and guidance to help contractors navigate the claims process and ensure that their claims are processed quickly and fairly.
Overall, an insurance broker can provide contractors in the oil and gas industry with the knowledge, expertise, and resources they need to find the best CGL insurance policy to protect themselves from liability and ensure that they have adequate coverage in the event of a claim.
One of the leading insurance broker in Indonesia focusing on oil gas insurance is L&G Insurance Broker.
For all your insurance needs, please call L&G now!
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24 HOURS L&G HOTLINE: 0811-8507-773 (CALL – WHATSAPP – SMS)
website: lngrisk.co.id
E-mail: customer.support@lngrisk.co.id
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